Understanding the Data: Financial Statements In order to effect the proper changes in an organization it is necessary to institute a way to assess their level of progress. To do this a variety of tools have been designed to assist businesses in their financial processes. These include income statements, balance sheets, and cash flow statements. Each item individually provides a different aspect of the organization’s performance level for a particular time period. However, by utilizing these statements together, it provides the management and owners, the necessary information to obtain the total scope of the financial status of the organization.
An income statement is designed to provide the data stating the “revenues generated and expenses incurred by a company over an accounting period” (Melicher, 2014). In providing this data to the managers and owners of the firm to assist in identifying the success of the company during the accounting period. The income statement identifies the gross profit, the operating income, the income before taxes, and the net income of the organization. This information allows analysts to determine the growth of the company during the designated accounting period.
A balance sheet portrays a company’s financial position at a given point in time. It identifies the company’s assets, liabilities, and the company’s equity. The balance sheet is derived “from the fact that the two sides of the equation (Assets = Liabilities +
An income statement, also known as a profit and loss statement shows how much money a company has spent over a period of time. It also shows the costs and expenses that are associated with earning that revenue. It is an important measure of the company’s profitability. The simple building blocks of a net income formula are revenues minus expenses equal net income.
A balance sheet gives an overall picture of a company's financial situation by showing the total assets of a business, including liabilities plus equity. Current assets can include cash, accounts receivable, inventory and prepayments for insurance. The balance sheet is used by investors to get an idea of what the shareholders have invested, including
* An income statement is a report that contains information in regards to an organizations’ assets and financing in order to obtain those assets that is collected over a certain period of time
The purpose of this paper is to define accounting, and identify the four basic financial statements. The paper also explains how the different financial statements are interrelated to each other and why they are useful to managers, investors, creditors, and employees.
The income statement (IS) also known as the profit & loss statement provides the net gain or net loss of a business entity. The importance of the income statement is to evaluate profitability of a company (Finkler, Jones, and Koyner, 2013). The best use of the IS,
A balance sheet is the most basic and essential financial statement for any organization. It contains the basic
Among the tools required for every business to survive and thrive, the ability to maintain a regular self-examination holds an indispensable place. The size of the business in question is almost of no consequence, only the potential complexity of the self-examination changes. A prime tool for such self-examinations is the family of related financial reporting that has become nearly universal in western businesses: the income statement, the balance sheet, and the statement of cash flows. This trio of reports enables management and owners to carefully examine the holdings and liabilities of their business so they may make
Separately, the balance sheet reports a company’s financial position while the income statement reports a company’s fiscal year profits and losses. The balance sheet measures a company’s financial position by reporting its assets, liabilities, and owner’s (shareholder’s) equity. The income statement measures a company’s financial performance by reporting its revenues, expenses, and net income/loss. When combined, they serve two vital purposes: (1) expand the accounting equation and (2) enable analysis using ratios to determine industry position or potential material misstatements. The increase or decrease in owner’s (shareholder’s) equity on the balance sheet is a direct result of the net
While inaccurate accounting can cause misleading information about the company, every successful company should develop an income statement and balance sheet when monitoring financial growth. Also, formulating a horizontal and ratio analysis creates an accurate trend of the company spending behavior and debt-to-ratio venerability. A balance sheet can be considered as the bloodline of the company, allowing a quick view of financial fluency which could be attractive to outside investors. Last but not least, the income statement presents a hard result of gains, liabilities, revenues and debt within a yearly
The Balance Sheet is another type of financial statement used by a company to see a snapshot of the company's financial position at a particular point in time. It lists the value of the company's assets followed by its liabilities. A balance sheet can be summed up by a simple equation:
The balance sheet is one of the major and critical financial statements that show the financial position of the company. The balance sheets tell the user of the
This income statement tells how much money a company has brought in (its revenues) how much it has spent (its expenses) and the difference between the two (its profit). The income statement show’s a company’s revenues and expenses over a specific time frame. This statement
An Income Statement provides an overview of an organization’s earnings performance during a specific time period. There are four components to the income statement: revenue, expenses, gains and losses.
The first of the financial statements is the income statement. The income statement states the revenues and expenses in an understandable way that shows a clear picture of net income or net loss for the
Balance sheets and income statements are a snapshot of a company’s stability and financial situation. Combined the statements show the income, expenses, and stockholder’s equity in the company. These statements are often analyzed by financial institutions when a company comes to them needing a loan. Stockholders and other investors also look at these statements to make sure their investment will return a profit for them. This paper will look at four different companies and their balance sheets and income statements. The companies are Eastman Chemical Company, Covenant Transportation